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- Bitcoin’s growth has led to new entrants joining the market with enthusiasm and confidence and making them believe that leverage is a positive sign
- Leverage magnifies investor losses and subsequently erode the entire investable amount and leave them bankrupt
- Experts believe that regulations will help stabilise the markets as investors will be more aware of the policies and trends in practice
Bitcoin (BTC) is the focus of attention, with the largest cryptocurrency surging beyond $40,000 on Monday. Unsurprisingly, the rise occurred shortly after Tesla CEO Elon Musk tweeted that the electric-car manufacturer would accept BTC payments once more miners approved green energy plans.
Despite the fact that Musk’s remark may have pushed the price of Bitcoin higher, other industry analysts predict the price will continue to rise. Caitlin Long, the CEO of Avanti Financial, believes that Bitcoin should not be used as a tool to leverage. Moreover, regulations are underway to regulate stablecoins and cryptocurrencies.
A regulatory push is needed for Bitcoins and stablecoins that will reduce volatility in prices and keep them stable. The pandemic has seen a huge influx of investors jumping in the cryptocurrency bandwagon and they need to be aware of the risks that they are entailing,
Leverage in Bitcoin is a big no
A report suggests that several investors have entered the market with a certain level of leverage. It is detrimental not only for the digital currencies but also the financial markets in general.
The loans provided against Bitcoin might default if its price declines for some unforeseen circumstances. Investors need to learn from the mistakes committed in the past and move forward in search of superior returns.
Volatile markets have the potential to eradicate the investible corpus which is quite hard on newbie traders. Losses are multiplied significantly if the markets go against the trades of an investors or institutional investor.
Regulations necessary for a stable market
Experts believe that Bitcoin’s biggest threat is its popularity which is misused by quite a few investors. Regulations need to be in place to avoid illicit transfers for various activities as well as speculative trading.
Investors need to pay taxes on time to avoid regulatory action from authorities. An unstable market has the potential to bring down the entire market of stablecoins and cryptocurrencies.
Furthermore, it will stabilise the US Dollar as 75% of the USDT is backed by cash and equivalents. Recently, Binance made headlines as the SEC and the US Justice Department was looking into activities related to illicit trading.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
